September 17, 2019

Greece and Lenders Near Deal on New Austerity Measures

ATHENS — After a week of tense negotiations, Greece and its foreign lenders were close to a deal on Monday on a new round of austerity measures that must be taken by the country to unlock further crucial rescue aid, with a politically contentious streamlining of the nation’s civil service looking likely.

Greece’s international creditors – the European Commission, European Central Bank and International Monetary Fund – said Monday that they had concluded their latest review of the country’s economic program and reached an agreement that was expected to be approved by euro zone finance ministers meeting in Brussels later in the day.

The lenders, known collectively as the troika, cited “important progress,” referring specifically to an overhaul of the tax system and a recapitalization of Greek banks that is “nearly complete.” But they noted that policy implementation was “behind in some areas.”

It remained unclear early Monday whether the finance ministers would approve the next batch of rescue aid of 8.1 billion euros, or $10.5 billion. Both the Greek finance minister, Yannis Stournaras, and the I.M.F.’s chief envoy to Athens, Poul Thomsen, said late on Sunday that progress had been made and that there was hope for a final deal before Monday’s ministers’ meeting.

The head of the euro zone finance ministers’ group, Jeroen Dijsselbloem of the Netherlands, told reporters in Brussels on Monday that the next loan to Greece might be disbursed in installments. “Whether that is necessary and helpful we will see on the basis of what the troika will present to us,” he said.

The negotiations had faltered last week on Greek pledges for cuts to civil service, a sensitive measure that nearly brought down the government last month after Prime Minister Antonis Samaras unilaterally shut down the state broadcaster, ERT. The move, which put some 2,700 employees out of work, prompted the junior partner in the three-way coalition of political parties to quit.

After much horse-trading, Greece and its creditors agreed on a procedure to put 12,500 civil servants into a so-called mobility program, where staff would receive a reduced wage for several months before being moved to another public sector post or dismissed, according to a government official who asked not to be named because of the confidential nature of the talks. Athens has also pledged to lay off a total of 15,000 civil servants by the end of next year.

Reports that thousands of employees of the capital’s municipal police force would be included in the plan prompted local workers to walk off the job on Monday. On Sunday night, the mayor of Athens, Giorgos Kaminis, was slightly injured after being assaulted by protesting workers while leaving a meeting on the cutbacks with visiting mayors from other Greek cities.

Although the negotiations on the civil service overhaul attracted the most media attention and speculation, the talks between government and troika officials focused on a range of issues. These included a budget gap of around 2 billion euros for 2013 and 2014, which officials have reportedly found ways to plug, chiefly through the control of spending in the health sector. Government officials said they would submit to Parliament a “multi-bill” with all the agreed-to changes as soon as the euro zone finance ministers approve them.

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Europeans Planted Seeds of Crisis in Cyprus

But the path that led to Cyprus’s current crisis — big banks bereft of money, a government in disarray and citizens filled with angry despair — leads back, at least in part, to a fateful decision made 17 months ago by the same guardians of financial discipline that now demand that Cyprus shape up.

That decision, like the onerous bailout package for Cyprus announced early Monday, was sealed in Brussels in secretive emergency sessions in the dead of night in late October 2011. That was when the European Union, then struggling to contain a debt crisis in Greece, effectively planted a time bomb that would blow a big hole in Cyprus’s banking system — and set off a chain reaction of unintended and ever escalating ugly consequences

“It was 3 o’clock in the morning,” recalled Kikis Kazamias, Cyprus’s finance minister at the time. “I was not happy. Nobody was happy, but what could we do?”

He was in Brussels as European leaders and the International Monetary Fund engineered a 50 percent write-down of Greek government bonds. This meant that those holding the bonds — notably the then-cash-rich banks of the Greek-speaking Republic of Cyprus — would lose at least half the money they thought they had. Eventual losses came close to 75 percent of the bonds’ face value.

The action had an anodyne name — private-sector involvement, or P.S.I. — and, it seemed at the time, a worthy goal: forcing private investors to share some of the burden of shoring up Greece’s crumbling finances. “We Europeans showed tonight that we reached the right conclusions,” Chancellor Angela Merkel of Germany announced at the time.

For Cypriot banks, particularly Laiki Bank, at the center of the current storm, however, these conclusions foretold a disaster: Altogether, they lost more than four billion euros, a huge amount in a country with a gross domestic product of just 18 billion euros. Laiki, also known as Cyprus Popular Bank, alone took a hit of 2.3 billion euros, according to its 2011 annual report.

What happened between the overnight session in 2011 and the one that ended early Monday morning is a study of how decisions made in closed conference rooms in Brussels — often in the middle of the night and invariably couched in impenetrable jargon — help explain why the so-called European project keeps getting blindsided by a cascade of crises.

“I cannot remember that European policy makers have seen anything coming throughout the euro crisis,” said Paul de Grauwe, a professor at the London School of Economics and a former adviser at the European Commission. “The general rule is that they do not see problems coming.”

Simon O’Connor, the spokesman for the union’s economic and monetary affairs commissioner, Olli Rehn, declined to comment on whether Mr. Rehn had taken a position on the possible impact of the Greek debt write-down on Cypriot banks.

As well as hitting Cyprus over its banks’ holdings of Greek bonds, the European Union also abruptly raised the amount of capital all European banks needed to hold in order to be considered solvent. This move, too, had good intentions — making sure that banks had a cushion to fall back on. But it helped drain confidence, the most important asset in banking.

“The bar suddenly got higher,” said Fiona Mullen, director of Sapienta Economics, a Nicosia-based consulting firm. “It was a sign of how the E.U. keeps moving the goal posts.”

Cyprus, she added, “created plenty of its own problems” and was not aided by the fact that the country’s last president, a communist who left office in February, and his central bank chief were barely on speaking terms. But decisions and perceptions formed more than 1,500 miles away in Brussels and Berlin “didn’t help and often hurt,” Ms. Mullen said.

Cyprus banks, bloated by billions of dollars from overseas, particularly from Russia, had many troubles other than Greek bonds, notably a host of unwise loans in Cyprus at the peak of a property bubble, now burst, and, critics say, to Greek companies with ties to Laiki’s former chairman, the Greek tycoon Andreas Vgenopoulos.

James Kanter contributed reporting from Brussels, and Dimitrias Bounias from Nicosia.

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Asian Markets Rebound After Turmoil

In Japan, second-quarter gross domestic product data showing that the economy there had contracted less severely than expected also helped lift sentiment.

The statistics, released by the Cabinet Office early Monday, showed that the Japanese economy, which was battered by a massive earthquake and tsunami in March, had contracted 0.3 percent from the previous quarter, indicating that economic activity had rallied more quickly than expected after the disaster.

The Nikkei 225 index was 1.2 percent higher by early afternoon in Tokyo.

However, investors in Japan are likely to keep a wary eye on the yen, whose ascent against other currencies is weighing on exporters.

On Monday, one U.S. dollar bought about 76.8 yen.

Elsewhere in Asia, the benchmark index in Australia rose 2.2 percent, and Hong Kong and Taiwan managed gains of 2.2 percent and 1.9 percent, respectively, by early afternoon.

In mainland China, the Shanghai composite index edged up 0.2 percent, and in Singapore, the Straits Times index climbed 0.6 percent.

The gains in Asia followed modest rises in the Dow Jones industrial average and the Standard Poor’s 500 index on Friday. They closed 1.1 percent and 0.5 percent higher, respectively, after a dizzying, rollercoaster performance as investors struggled to assess the impact of the U.S. ratings downgrade.

The overall global markets, however, are expected to remain jittery, with much uncertainty about the debt crisis in Europe and the health of the U.S. economy.

Futures on the S. P. 500 were 0.5 percent higher by early afternoon in Asia.

“Decent data on Thursday and Friday last week brought a semblance of stability to markets,” analysts at DBS in Singapore wrote in a research note on Monday, referring to U.S. retail sales and jobless figures that were both relatively upbeat.

“Housing, inflation and industrial production will have the do the trick this week,” the DBS analysts commented. “It won’t be easy.”

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The New Yorker Begins to Offer iPad Subscriptions

“Whether it’s in there,” he said, pointing to the magazine, “or on there,” pointing to the iPad, “is going to cost about a dollar under this plan. That’s what a song costs. A lot has gone into it. Imaginative effort, editorial footwork, fact-checking and copy editing, all at the highest level every week. All of that for the price of a song? Seems like a pretty good deal to me.”

Apple, which released the iPad last March, has been busy rounding up publishers to help make its tablet even more appealing to consumers. Last week, Hearst Magazines announced a deal for iPad subscriptions to some of its magazines that will begin in July and Time Inc. made an arrangement for subscribers to get some magazines free, but Condé Nast is the first major publisher to begin a subscription plan on the iPad for one of its magazines (previously readers had to download each issue individually).

And the iPad subscription offer is quite aggressive: $5.99 for one month (for four issues) and $59.99 for a full year. But even more surprising, a bundled version of print and digital subscriptions, is available for $6.99 a month, or $69.99 a year. (Current print subscribers can sign in to the iPad version at no additional charge.)

Subscriptions on the iPad to The New Yorker went on sale early Monday, and subscriptions for other Condé Nast magazines, including Vanity Fair, Glamour, Golf Digest, Allure, Wired, Self and GQ, will become available in the coming weeks. The Condé Nast-Apple deal was first reported in The New York Post last week.  

“We already have these applications in our store and the No. 1 bit of feedback that we have gotten from our customers, the one thing that everyone wants, is to be able to subscribe,” Mr. Cue said.

Condé Nast has traditionally gotten its magazines in the hands of consumers at a cheap price in the hopes of building up big rate bases, the number used to sell advertisers, and the deal with Apple is consistent with that advertising-first approach. Over time, the new tablet subscribers could be a boon to advertising now that the Audit Bureau of Circulations has ruled that digital subscribers can be counted toward the rate base. The bundled subscriptions could also help protect the legacy business by giving a boost to print subscriptions while selling many more digital ones — young people and international consumers are a particular target.

“In terms of the price, we are constantly examining what will work and decided that we wanted to make the initial offer as attractive as possible,” Mr. Sauerberg said.

It will come at a price. Although Condé Nast can sell digital subscriptions on its own Web sites, the vast majority of sales will take place in the Apple App Store, where nearly a third of the price will go to Apple (specific terms were not disclosed). In addition, the consumer data derived from app store sales will belong to Apple and shared as the company sees fit, although Mr. Cue said that “magazine publishers will know a lot more about subscribers on the iPad than they ever did about print subscribers.”

By teaming with Apple, Condé Nast and other publishers gain access to a database of 200 million credit card holders and a sales environment where billions of songs and millions of apps have already been sold. But the music industry lesson is one that is not lost on publishing. Apple may have “saved” the music industry, but it is a much smaller business with little control over its pricing.

“Of course, we have a very different perspective on that,” Mr. Cue said. “We didn’t shrink the music business, it was pretty shrunk by the time we came along. We have proven that people are willing to pay for content and that’s something people never believed would happen. Some people still don’t believe it.”

Condé Nast, which has often been cautious with the digital realm — for a long time many of its magazines didn’t have individual Web sites — has moved swiftly to be first to market with iPad subscriptions.

“If you are going to get thousands of readers that you didn’t have before, or maybe even hundreds of thousands of readers, you’d be foolish to complain about the work that went into coming up with something they found compelling on the iPad,” Mr. Remnick said. “It is a very big opportunity for a magazine like The New Yorker to find whole new audiences.”

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